You have been hired as a financial analysts by the M&D company. The CEO asks you to enlist an underwriter to help raise $20 million by issuing 10 year bonds. You contacted John Smith, an underwriter at Goldman Sack’s to discuss the bond features M&D should consider and what coupon rate the issue will likely have. The company’s CEO asks you for a memo describing the effect of each of the following bond features on the coupon rate of the bond together with the advantages and disadvantages of each feature:
(Please show all work and formulas used)
1)The security of the bond , that is, whether the bond has collateral
2)The seniority of the bond
3)The presence of a sinking fund
4)A call provision with specified call dates and call prices
5)A deferred call accompanying the above call provision
6)Any positive covenants
7)Any negative covenants
8)A conversion feature
9)A floating rate coupon